Expats in SA urgently re-evaluating finances due to looming Hard Brexit

Money time in UKMany of the 300 000-plus British expats across South Africa are “now urgently re-evaluating their medium and long-term financial plans” due to an impending ‘Hard Brexit’.

The observation from deVere Group representative, Gavin Smith, comes following ongoing statements from British politicians about the negotiations for Britain’s exit from the EU and the subsequent financial fallout of these.

Mr Smith affirms: “UK Prime Minister, Theresa May, has announced that Article 50 – the official starting pistol for Britain’s divorce proceedings from the EU – would come into play no later than March next year.

“The rhetoric coming from London suggests that the British government is heading for a Hard Brexit. This means that the UK would slash ties from the single market for goods, services, people and capital, plus the free trade area.”

He continues: “Following UK government’s widely assumed Hard Brexit approach, the pound has fallen considerably against most major currencies. Indeed, immediately after Mrs May’s Brexit speech at the Conservative party conference, the pound fell to a 30-year low of $1.27.

“The Brexit battering turbulence has continued since, with the pound losing 20.2 per cent against the Rand since the referendum result.”

Mr Smith goes on to say: “This expected Hard Brexit, and the subsequent pounding of the pound, is having a major impact on British expats here in South Africa.

“As a direct result, many are now urgently reviewing their medium and long-term financial plans in three main areas.

“First, the falling value of the pound has a serious negative effect for those who are in receipt of and/or live off a UK pension: they will have taken a 20 per cent hit to their British pension since the Brexit vote.

Therefore, the cost of living has become more expensive and their purchasing power has taken a bashing.

“To help mitigate the adverse impact of currency fluctuations, there’s been a significant increase in people seeking to transfer their UK pensions out of Britain into an HMRC-recognised overseas pension scheme.

“Second, for expats earning Rand and sending money ‘back home’, the scenario is quite different. A weaker pound helps to repatriate a higher amount straight away. Those who are working in South Africa and have liabilities in the U.K, such as a mortgage, school fees, or a child’s wedding, for example, have got richer with sterling’s fall.

“These people will be seeking advice on how to capitalise on this because whilst a cheaper currency will lead to inflation, the negative effects of inflation will take time to come into play, whilst the currency exchange advantages happen immediately.

“And third, until negotiations start – and beyond – there remain question marks over the UK’s relationship with Europe and the rest of the world. Naturally, this creates ongoing and growing uncertainty.

“Against this backdrop of uncertainty, many expats will be looking to reassess their investment portfolios, reducing their exposure to UK assets, and increasing exposure to international ones.”

Mr Smith concludes: “The fallout of Brexit is likely to impact British expats across South Africa in one way or another. Therefore, it is shrewd and proactive that many are seeking advice on how to sidestep the negatives of this referendum, and how to use the opportunities it presents to their financial benefit.”

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